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Why Arctic Cat's Shares Got Iced

Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Arctic Cat(NASDAQ:ACAT) are down nearly 10% today, despite posting record-breaking earnings for its second fiscal quarter. Investors focused on the company's full-year earnings guidance, which came in below expectations, despite getting a boost in the latest report.

So what: Arctic Cat's quarterly revenue of $229.0 million was below the consensus estimate of $232.9 million, but EPS outperformed the $1.79 consensus by a penny. That brought full-year EPS guidance up by $0.10 on both high and low ends, to a new range of $2.65 to $2.75. Unfortunately, analysts had sky-high expectations of $2.86 in EPS for the full year, so even this solid progress wasn't enough to please the market.

Now what: Arctic Cat's EPS has been heading straight upwards since the waning days of 2010. The company's current full-year guidance will push that number even higher, to an improvement of 54% to 60% over fiscal 2012's EPS. It's possible that we'll see that fall if consumers decide to tighten their belts, but present economic trends have not indicated any such belt-tightening in store domestically. Arctic Cat's current P/E is hardly outlandish, and its fundamentals remain sound, so curious investors may want to take a closer look after today's drop.

Author

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.